Would it be possible to make a gift of items to a limited company in a Will/Personal Chattels Memorandum?
I note that there are several other threads on the forum discussing limited companies as beneficiaries but these appear to relate to Deeds of Variation and Discretionary Trusts.
I hope that my query is somewhat more straightforward!
It is possible in law as Andrew has stated. I’d consider the implications of a gift to the company balance sheet as it may create an unwanted tax issue.
As Richard says, it might be possible, but is it desirable?
As discussed in the May 2020 edition of The Law Society’s PS Journal, the existence of a corporate executor may have unexpected consequences, including:
The chattels, being an asset of the company, will need to be reflected in its annual accounts.
Authority to comply with the wishes of the testator will need to be given by the board, either on a case-by-case basis or by formal delegation to, say, a manager.
If the chattels are considered a “capital” item, rather than a “revenue” item, can they be distributed other than to members of the company?
If the value of the chattels is significant, might specific shareholder approval, or a court order, be needed to protect the directors passing significant company assets to non-members?
Where section 143 of the IHTA 1984 does not apply (e.g. as the testator has not expressed wishes in relation to all those items given to the executor) and the company is a “close company”, the distribution of any such items may result in the “participators” in that company having an IHT liability, as HMRC will look through the company and attribute such distributions to the participators as chargeable lifetime transfers.
Is the company liable to corporation tax on receipt of the legacy?
It is not unusual for corporate executors owned by, say, law firms or accountancy firms, to be registered as “dormant” at Companies House. If such a company accepts the legacy, even if it redistributes it in full in accordance with the testator’s wishes, does it need to convert to “active” status and file accounts, etc?
The court’s decision in Re Stirling (deceased), Union Bank of Scotland Ltd v Stirling and others [1954] Ch D 113, in which the issue was considered, was an eye-opener for a number of reasons, including some of those identified above.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals